Rahaxi (RHXI) 10-Q 2009 Q3 Quarterly report

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2009
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from  ______________ to ______________

COMMISSION FILE NUMBER: 0-28749

Rahaxi, Inc.

(Exact Name of Company as Specified in Its Charter)

Nevada	88-0446457
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

31 Mespil Road, Ballsbridge, Dublin 4, Ireland

(Address of Principal Executive Offices)

353-404-66433

(Company's Telephone Number)

______________________________________________________________________

(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report)

Securities registered under Section 12 (b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock - $0.001 par value

Check whether the issuer has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2of the Exchange Act. Yes o  No x

APPLICABLE ONLY TO CORPORATE ISSUERS

As of  May 13, 2009, there were 439,932,663  shares (post reverse split) of Common Stock issued and outstanding.

TABLE OF CONTENTS

		PAGE
PART I FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)
	CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2009 AND JUNE 30, 2008	F-1
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2009 AND 2008	F-2
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 2009 AND 2008	F-3
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	F-5 to F-15
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1
ITEM 3	QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	9
ITEM 4.	CONTROLS AND PROCEDURES	9
PART II OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	10
ITEM 1A	RISK FACTORS	10
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	13
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	13
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	13
ITEM 5.	OTHER INFORMATION	13
ITEM 6.	EXHIBITS	13
SIGNATURES		14

FREESTAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
	March 31,			June 30,
	2009			2008
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	423,350		$	692,802
Accounts receivable, net of allowance for doubtful accounts of $30,963
and $91,483 at March 31, 2009 and June 30, 2008,  respectively (note 2)		305,136			724,944
Other current assets (note 3)		251,824			143,482
Inventory (note 4)		382,591			579,030
Total current assets		1,362,901			2,140,258
Property, plant and equipment, net of accumulated depreciation and amortization of
$297,799 and $286,240 at March 31, 2009 and June 30, 2008, respectively (note 5)		93,577			165,990
Customer relationships and contracts, net of accumulated amortization of $1,390,856
and $1,158,413 at March 31, 2009 and June 30, 2008, respectively (note 6)		1,558,393			1,790,836
Total assets	$	3,014,871		$	4,097,084
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses (note 7)	$	3,472,719		$	3,648,224
Notes payable, current portion (note 8)		311,000			-
Notes payable - related parties, current portion (note 8)		300,000			-	��
Due to related parties (note 9)		883,053			774,209
Deferred revenue		198,320			243,063
Total current liabilities		5,165,092			4,665,496
Commitments and contingencies
Non-controlling interest		539,013			476,528
Stockholders' Deficit: (notes 10, 11)
Convertible preferred stock, series A, $0.001 par value,
1,000,000 shares  authorized; 1,000,000 shares issued and outstanding		1,000			1,000
Convertible preferred stock, series B, $0.001 par value, 4,000,000 shares
authorized; no shares issued and outstanding at March 31, 2009		-			-
and June 30, 2008
Additional paid-in capital - preferred stock		432,058			432,058
Common stock, $0.001 par value, 500,000,000 shares authorized;  220,360,663
and 125,805,444 shares issued and outstanding at March 31, 2009
and June 30, 2008, respectively		220,360			125,805
Additional paid-in capital - common stock		104,890,006			95,702,395
Common stock subscriptions receivable		-			(1,131,590	)
Common stock subscribed		1,114,777			1,195,457
Accumulated deficit		(109,796,498	)		(97,569,812	)
Accumulated other comprehensive gain		449,063			199,747
Total stockholders' deficit		(2,689,234	)		(1,044,940	)
Total liabilities and stockholders' deficit	$	3,014,871		$	4,097,084
The accompany notes form an integral part of these unaudited consolidated condensed financial statements.

F-1

FREESTAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three			Three			Nine			Nine
	Months Ended			Months Ended			Months Ended			Months Ended
	March 31,			March 31,			March 31,			March 31,
	2009			2008			2009			2008
Revenue
Transaction processing	$	404,769		$	575,002		$	1,463,531		$	1,575,507
Consulting services		375,077			760,119			1,416,653			2,049,958
Hardware and related		404,959			294,029			926,874			806,893
Total revenue		1,184,805			1,629,150			3,807,058			4,432,358
Cost of revenue
Transaction processing		367,804			623,110			995,111			1,866,738
Consulting services		233,036			487,860			769,525			1,483,174
Hardware and related		166,367			207,402			403,248			657,057
Total cost of sales		767,207			1,318,372			2,167,884			4,006,969
Gross profit (loss)		417,598			310,778			1,639,174			425,389
Selling, general and administrative expenses		4,090,082			2,774,702			12,635,831			12,840,282
Loss from operations		(3,672,484	)		(2,463,924	)		(10,996,657	)		(12,414,893	)
Other income (expenses):
Financing cost		-			-			(1,131,590	)		-
Additional cost of acquisition		-			-			-			(192,555	)
Interest income/(expense)		(27,850	)		(6,660	)		(60,037	)		(37,071	)
Loss before income taxes and non-controlling interest in subsidiaries		(3,700,334	)		(2,470,584	)		(12,188,284	)		(12,644,519	)
Income taxes		-			-			-			-
Income (loss) attributable to non-controlling interest		(25,210	)		39,789			38,402			73,402
Net Loss		(3,675,124	)		(2,510,373	)		(12,226,686	)		(12,717,921	)
Other - Comprehensive income (loss):  Gain (Loss) on foreign exchange		45,445			120,198			249,413			330,798
Comprehensive loss	$	(3,629,679	)	$	(2,390,175	)	$	(11,977,370	)	$	(12,387,123	)
Loss per share - basic and diluted	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.05	)
Weighted average shares outstanding - basic		200,469,929			301,291,750			162,466,073			275,810,098
Weighted average shares outstanding - diluted		200,469,929			309,006,033			162,466,073			283,524,384
The accompany notes form an integral part of these unaudited condensed consolidated financial statements.

F-2

FREESTAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Nine			Nine
	Months Ended			Months Ended
	March 31,			March 31,
	2009			2008
Cash flows used for operating activities:
Net loss	$	(12,226,686	)	$	(12,717,921	)
Income attributable to non-controlling interest		38,402			73,402
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Bad debt expense		(28,425	)		-
Depreciation and amortization		281,076			707,474
Non-cash financing cost		1,131,590			-
Non-cash compensation		7,401,416			6,837,135
Changes in assets and liabilities:
(Increase) decrease in assets
Accounts receivable		543,757			38,882
Inventory		278,597			98,134
Other current assets		26,075			(46,773	)
Increase (decrease) in liabilities
Accounts payable and accrued expenses		(648,261	)		1,375,406
Deferred revenue		(44,743	)		71,718
Accrual of salary to officers		108,844			469,678
Total adjustments		9,088,328			9,625,056
Net cash used by operating activities		(3,138,358	)		(3,092,865	)
Cash flows provided by (used for) investing activities:
Purchase of fixed assets		-			(37,918	)
Purchase of software and capitalized software cost		-			(355,441	)
Net cash used by investing activities		-			(393,359	)
Cash flows provided by (used for) financing activities:
Proceeds from sale of common stock		504,263			965,000
Proceeds from issuance of notes payable		311,000			-
Proceeds from issuance of notes payable - related party		300,000			-
Proceeds from exercise of stock options/warrants		1,175,807			2,280,106
Cash contributed by officer of subsidiary		35,857			252,721
Net cash provided by financing activities		2,326,927			3,497,827
Net (decrease) increase in cash and cash equivalents		(811,431	)		11,603
Foreign currency translation adjustments		541,979			(263,861	)
Cash and cash equivalents, beginning of period		692,802			466,408
Cash and cash equivalents, end of period	$	423,350		$	214,150

F-3

FREESTAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Nine		Nine
	Months Ended		Months Ended
	March 31,		March 31,
	2009		2008
Supplemental disclosure of cash flow information:
Interest paid	$	-	$	-
Income tax paid	$	-	$	-
Common stock issued to consultants for services	$	5,698,198	$	4,071,542
Common stock issued to employees as compensation	$	240,100	$	181,750
Adjustment of unearned common stock for the period	$	-	$	99,298
Adjustment of deferred compensation for the period	$	-	$	513,186
Common stock issued for subscriptions receivable	$	348,000	$	1,500,000
Common stock issued to officers and directors for services	$	125,000	$	269,000
Fair value of options issued to consultants and employees	$	1,261,026	$	1,702,359
Conversion of preferred stock to common stock	$	-	$	360,000
Common stock issued for rent	$	120,000	$	-

The accompany notes form an integral part of these unaudited condensed consolidated financial statements.

F-4

RAHAXI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009

(UNAUDITED)

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS OPERATIONS

Basis Of Presentation

The accompanying unaudited condensed consolidated financial statements of Rahaxi, Inc., a Nevada corporation ("Company"), have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. These condensed consolidated financial statements and related notes should be read in conjunction with the Company's Form 10-K for the fiscal year ended June 30, 2008. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of March 31, 2009, and the results of operations for the three and nine months ended March 31, 2009 and 2008, and cash flows for nine months ended March 31, 2009 and 2008. The results of operations for the three and nine months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the entire fiscal year.

Nature Of Business Operations

The Company was formed on November 17, 1999 as a Nevada corporation. The Company is a provider of payment services and processing. Its principal offices are in Dublin, Ireland; the Company also has offices in Helsinki, Finland; Stockholm, Sweden; Geneva, Switzerland; and Santo Domingo, the Dominican Republic.  On November 21, 2008, we filed a Certificate of Amendment to our Articles of Incorporation with the Nevada Secretary of State changing our name to “Rahaxi, Inc” and implementing a one-for-three reverse stock split of our common stock.

The  Company  derives  revenues  from  its core  payment  processing products,  which include:  (1) Authorization / Transaction Fees:  transaction fees it receives from processing point of sale terminal transactions;  (2) Hardware Sales / Point of Sale Terminals: sales of “Point of Sale” terminals and related maintenance and service initiation fees; (3) Dynamic  Currency  Conversion:  in addition to transaction authorization, the Company offers certain clients real-time, dynamic currency conversion, allowing a customer to pay for a product or service with their credit card in their local currency;  (4) Private Label Cards:  transaction  management services provided for a private label card issuer;  and (5) Consulting Fees: consulting services provided to financial institutions and merchants.

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has reported a net loss of $3,675,124  and $12,226,686 for the three and nine months ended March 31, 2009 and $23,150,901 for the year ended June 30, 2008, and had an accumulated deficit of $109,796,498 as of March 31, 2009.

The Company believes that anticipated revenues from operations will be insufficient to satisfy its ongoing capital requirements for the next 12 months.  If the Company’s financial resources  are insufficient, the Company will require  additional  financing in order to execute its operating plan and continue as a going  concern.  The Company cannot predict whether this  additional  financing will be in the form of equity or debt, or be in another form. The Company may not be able to obtain the necessary  additional capital on a timely  basis,  on  acceptable  terms,  or at all.  In any of these events,  the Company may be unable to implement its current plans for expansion, repay  its  debt  obligations  as they  become due, or  respond  to  competitive pressures,  any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations.

Management plans to take the following steps that it believes will be sufficient to  provide  the  Company  with the ability to continue as a going concern. Management  intends to raise financing  through the sale of its stock in private placements to individual investors.

Management  may also raise funds in the public markets.  Management believes that with this financing, the Company will be able to generate additional revenues that will allow the Company to continue as a going  concern.  This will be accomplished by hiring additional  personnel and focusing sales and marketing efforts on the distribution of product through key marketing  channels currently being  developed  by the  Company.  The Company  may also  pursue  the acquisition of certain strategic industry partners where appropriate, and may also seek to raise funds through debt and other financings.

Revenue Recognition

The Company recognizes revenues from contracts in which the Company provides only consulting services as the services are performed. The contractual terms of the agreements dictate the recognition of revenue by the Company. Payments received in advance are deferred until the service is provided.

Contract costs include all direct equipment, material, and labor costs and those indirect costs related to contract performance, such as indirect labor. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in contract performance, contract conditions, and estimated profitability that may result in revisions to costs and income are recognized in the period in which the revisions are determined.

F-5

For revenue from product sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which superseded SAB No. 101, "Revenue Recognition in Financial Statements." SAB No.101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. SAB No. 104 incorporates Emerging Issues Task Force ("EITF") No. 00-21, "Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing EITF No. 00-21 on the Company's consolidated financial position and results of operations was not significant. This issue addresses determination of whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting. EITF No. 00-21 became effective for revenue arrangements entered into in periods beginning after June 15, 2003. For revenue arrangements occurring on or after August 1, 2003, the Company revised its revenue recognition policy to comply with the provisions of EITF No. 00-21.

For those contracts which contain multiple  deliverables,  management must first determine whether each service, or deliverable, meets the separation criteria of EITF No. 00-21. In general, a deliverable (or a group of deliverables) meets the separation  criteria if the deliverable has standalone value to the customer and if there is objective  and reliable  evidence of the fair value of the remaining deliverables  in the  arrangement.  Each  deliverable  that meets the separation criteria is considered a “separate unit of accounting.” Management allocates the total arrangement consideration to each separate unit of accounting based on the relative  fair  value  of  each  separate  unit of  accounting.  The  amount  of arrangement  consideration  that is allocated to a unit of  accounting  that has already been delivered is limited to the amount that is not contingent  upon the delivery  of  another  separate  unit  of  accounting.   After  the  arrangement consideration has been allocated to each separate unit of accounting, management applies the  appropriate  revenue  recognition  method for each separate unit of accounting as described  previously based on the nature of the arrangement.  All deliverables  that do not meet the  separation  criteria  of EITF No.  00-21 are combined into one unit of accounting,  and the appropriate  revenue  recognition method is applied under SAB No. 101. Processing fee revenue is earned based   upon the actual  number of transactions  processed  through the Company’s processing system.  Transaction processing  fees are  recognized  in the period that the  service is  performed. These fees are typically  charged on a per transaction  basis,  depending on the arrangement with the customer.  Maintenance fees for processing terminals are recognized over the period for which maintenance is provided.

The Company’s subsidiary Rahaxi, Inc. charges certain customers for one-time initiation fees and annual maintenance fees.    These fees are charged to deferred revenue when billed, and  revenue from these fees is recognized straight-line over the billing coverage period, typically twelve months.

Stock Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123 (revised), “Share-Based Payment” (SFAS 123R) utilizing the modified prospective approach. Prior to the adoption of SFAS 123R we accounted for stock option grants in accordance with APB Opinion No. 25, “Accounting for Stock Issued to Employees” (the intrinsic value method), and accordingly, recognized compensation expense for stock option grants.

Aggregate intrinsic value of options outstanding and options exercisable at March  31, 2009 was $0. Aggregate intrinsic value represents the difference between the Company's closing stock price on the last trading day of the fiscal period, which was $0.05 as of March 31, 2009, and the exercise price multiplied by the number of options outstanding.  As of March 31, 2009, total unrecognized stock-based compensation expense related to non-vested stock options was $0. The total fair value of options vested was $0 and $229,167 for the nine month periods ended March 31, 2009 and 2008, respectively.

Capitalized Software Development Costs

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed," the Company capitalizes certain costs related to the development of new software products or the enhancement of existing software products for use in our transaction processing software. These costs are capitalized from the point in time that technological feasibility has been established, as evidenced by a working model or detailed working program design to the point in time that the product is available for general release to customers. Capitalized development costs are amortized on a straight-line basis over the estimated economic lives of the products, beginning when the product is placed into service. Research and development costs incurred prior to establishing technological feasibility and costs incurred subsequent to general product release to customers are charged to expense as incurred. The Company periodically evaluates whether events or circumstances have occurred that indicate that the remaining useful lives of the capitalized software development costs should be revised or that the remaining balance of such assets may not be recoverable.

The Company often has under development several discreet design features or enhancements, each of which may be completed and released to customers at different times. During the year ended June 30, 2008, the Company recognized an impairment of its software and software licenses in the amount of $4,086,502.  The total net book value of software in service at March 31, 2009 is $0.  Total amortization expense related to software and software licenses charged to operations for the nine months ended March 31, 2009 and 2008 was $0 and $400,303, respectively.

Impairment of Long-Lived Assets

The Company has adopted Statement of Financial Accounting Standards No. 144 (SFAS 144).  The Statement   requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undercounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.  SFAS No. 144 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

F-6

During the year ended June 30, 2008, the Company management performed an evaluation of its intangible assets (capitalized software) for purposes of determining the implied fair value of the assets at June 30, 2008. The test indicated that the recorded remaining book value of its intellectual property exceeded its fair value, as determined by discounted cash flows.  As a result, upon completion of the assessment, management recorded a non-cash impairment charge of $4,086,502, net of tax, or $0.042  per share (post reverse-split) during the year ended June 30, 2008 to reduce the carrying value of the capitalized software to $0. Considerable management judgment is necessary to estimate the fair value.  Accordingly, actual results could vary significantly from management’s estimates.

Inventories

Inventory is stated at the lower of cost or market determined by the first-in, first-out method. Inventories consist primarily of equipment held for resale.

New Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest (formerly presented as minority interest) in a subsidiary and for the deconsolidation of a subsidiary. Upon its adoption, effective for us in the fiscal year beginning July 1, 2009, noncontrolling interests will be classified as equity in the Company’s balance sheet and income and comprehensive income attributed to the noncontrolling interest will be included in the Company’s income and comprehensive income, respectively. The provisions of this standard must be applied prospectively upon adoption except for the presentation and disclosure requirements. The Company is currently evaluating the impact that SFAS No. 160 will have on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133”. SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133 for derivative instruments and hedging activities. SFAS No. 161 requires qualitative disclosure about objectives and strategies for using derivative and hedging instruments, quantitative disclosures about fair value amounts of the instruments and gains and losses on such instruments, as well as disclosures about credit-risk features in derivative agreements. We do not expect the adoption of SFAS No. 161 to have a significant impact on our consolidated financial statements.

In April 2008, the FASB issued FSP No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, “Goodwill and Other Intangible Assets”. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The Company is currently evaluating the impact, if any, that FSP 142-3 will have on its consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company does not currently expect the adoption of SFAS 162 to have a material effect on its consolidated results of operations and financial condition.

In May 2008, the FASB issued FSP Accounting Principles Board (“APB”) 14-1 “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. The Company does not believe the adoption of FSP APB 14-1 will have significant effect on its consolidated results of operations and financial condition.

Effective January 1, 2009, the Company adopted the Financial Accounting Standards Board's Staff Position (FSP) on the Emerging Issues Task Force (EITF) Issue No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.”  The FSP required that all unvested share-based payment awards that contain nonforfeitable rights to dividends should be included in the basic Earnings Per Share (EPS) calculation.  This standard did not affect the consolidated financial position or results of operations.

In April 2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS No. 115-2”). FSP FAS No. 115-2 provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. This FSP is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company plans to adopt the provisions of this Staff Position during the second quarter of 2009, but does not believe this guidance will have a significant impact on its consolidated financial statements.

In April 2009, the FASB issued FSP FAS No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS No. 157-4”). FSP FAS No. 157-4 provides additional guidance in determining whether the market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes as defined in SFAS No. 157, “Fair Value Measurements.” FSP FAS No. 157-4 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company will apply the provisions of this statement prospectively beginning with the second quarter 2009, and does not expect its adoption to have a material effect on its consolidated financial statements.

F-7

In April 2009, the FASB issued FSP FAS No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS No. 107-1 and APB 28-1”). This FSP amends FASB Statement No. 107, “Disclosures about Fair Values of Financial Instruments,” to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. APB 28-1 also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in all interim financial statements. This standard is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company plans to adopt FSP FAS No. 107-1 and APB 28-1 and provide the additional disclosure requirements beginning in second quarter 2009.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future consolidated financial statements.

2. ACCOUNTS RECEIVABLE

Accounts receivable consists of the following:

	March 31,			June 30,
	2009			2008
Amounts receivable from customers	$	336,099		$	816,427
Less: Reserve for doubtful accounts		(30,963	)		(91,483	)
Accounts receivable, net	$	305,136		$	724,944

3.  OTHER CURRENT ASSETS

Other current assets consists of the following:

	March 31,		June 30,
	2009		2008
Prepaid expenses	$	128,034	$	70,840
Advances to employees		1,890		11,049
Deposits		121,900		61,593
	$	251,824	$	143,482

4. INVENTORY

Inventory consists of the Company's Point of Sale Terminals which have been purchased from third party manufacturers. Components of inventories are as follows:

	March 31,		June 30,
	2009		2008
Finished goods	$	382,591	$	579,030
Total	$	382,591	$	579,030

 5. PROPERTY AND EQUIPMENT

A summary of property and equipment is as follows:

	March 31,			June 30,
	2009			2008
Computer equipment	$	189,290		$	210,791
Furniture and office equipment		202,086			241,439
		391,376			452,230
Less: accumulated depreciation		(297,799	)		(286,240	)
Property and equipment, net	$	93,577		$	165,990

Total depreciation and amortization expense for property and equipment amounted to $48,636 and $74,732 for the nine months ended March 31, 2009 and 2008, respectively.

F-8

6. ACQUISITION OF INTANGIBLE ASSETS

The costs to acquire intangible assets have been allocated to the assets acquired according to the estimated fair values. The Company has adopted SFAS No. 142, Goodwill and Other Intangible Assets, whereby the Company periodically tests its intangible assets for impairment. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets are tested for impairment, and write-downs will be included in results from operations.

The identifiable intangible assets acquired and their carrying values at March 31, 2009 are:

	Gross Carrying Amount		Accumulated Amortization		Net		Residual Value		Average  Amortization Years
Amortizable Intangible Assets:
Customer Relationships and Contracts	$	2,949,249	$	1,390,856	$	1,558,393	$	-		10.0

The identifiable intangible assets acquired and their carrying values at June 30, 2008 are:

	Gross Carrying Amount		Accumulated Amortization		Net		Residual Value		Average  Amortization Years
Amortizable Intangible Assets:
Customer Relationships and Contracts	$	2,949,249	$	1,158,413	$	1,790,836	$	-		10.0

Customer relationships and contracts amortization expense charged to operations for the nine months ended March 31, 2009 and 2008 was $232,440 for each period.   

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at March 31, 2009 and June 30, 2008 are as follows:

	March 31,		June 30,
	2009		2008
Accounts payable and accrued expenses	$	3,029,515	$	3,330,480
Accrued payroll and related expenses		430,120		317,744
Accrued interest		13,084		-
	$	3,472,719	$	3,648,224

8.    NOTES PAYABLE

In July and August  2008, the Company signed four notes payable (the “6% Short Term Notes”) in the aggregate principal amount of $611,000. The 6% Short Term Notes were originally due six months from the date of the notes, and bear interest at the rate of 6% per annum.  In January and February 2009, the 6% Short Term Notes were extended to August 2009.  The Company has the option to either  repay the principal and accrued interest due under the 6% Short Term Notes in cash or  in  common stock.  If paid in the form of common stock, the price will be 80% of the closing price of the Company’s common stock on the date of the notes, which ranged from $0.150 to $0.171 (post reverse-split).  During the three months ended March 31, 2009, the Company accrued interest in the amount of $9,175  on the 6% Short Term Notes.  At March 31, 2009, the principal and accrued interest of the 6% Short Term Notes are convertible into a total of 4,996,772 shares (post reverse-split) of the Company’s common stock.

One of the 6% Short Term Notes in the principal amount of $300,000 is payable to a board member of the Company (note 9).

 9.  DUE TO RELATED PARTIES

The Company’s President and Chief Executive Officer (“CEO”) and  the Company’s Chief Financial Officer (“CFO”) occasionally forego taking their salary payments in order to conserve the Company’s cash. The Company’s CEO and CFO  have also advanced funds to the Company.  These advances accrue interest at the rate of 7% per annum.  The CEO and CFO also each receive a car allowance in the amount of $2,140 per month.  These car allowances have not yet been paid.

The Company owed the following to these executives for accrued salaries, advances,  accrued interest, and car allowance at March 31, 2009:

	Board
	Member		CEO		CFO		Total
Accrued Salary	$	-	$	359,771	$	82,889	$	442,660
Advances		-		248,997		63,973		312,970
Accrued Interest		10,487		22,289		3,857		36,633
Accrued Car Allowance		-		45,395		45,395		90,790
Total	$	10,487	$	676,452	$	196,114	$	883,053

F-9

At June 30, 2008:

	CEO		CFO		Total
Accrued Salary	$	317,385	$	147,123	$	464,508
Advances		217,613		19,268		236,881
Accrued Interest		9,179		2,069		11,248
Accrued car allowance		30,786		30,786		61,572
Total	$	574,963	$	199,246	$	774,209

During the nine months ended March 31, 2009, the Company received a loan in the amount of $300,000 from a director (see note 8).  On April 15, 2009, the Company received notice of this director’s resignation effective April 2, 2009.   At March 31, 2009, the accrued interest on this loan is $10,487. The combined principal and interest at March 31, 2009 of $310,487 is convertible at the Company’s discretion into shares  of the Company’s common stock at the rate of $0.12 per share (post reverse-split), which would result in the issuance of 2,587,392 shares (post reverse-split). This note along with interest accrued at the rate of 6% is due on August 10, 2009.

10. EQUITY

Reverse Split of Common Stock

Effective November 21, 2008, we implemented a one-for-three reverse-split of our common stock. There were 426,671,694 shares of stock outstanding immediately before the reverse-split, and 142,222,898 shares outstanding immediately after the reverse-split.  All share and per share information in these financial statements have been adjusted to reflect the effects of this reverse split.

Non-controlling interest

Non-controlling interest consists of the minority owned portion of the Company’s 50% owned subsidiary PLC Partners.

Private Placement of Common Stock

On January 27, 2006, the Company signed subscription agreements with a group of offshore investors for the sale of an aggregate of $9.2 million in Company common stock, plus warrants (the “January Financing”). Due to the failure of the investment group to timely fund in full the first payment required for the purchase of shares and warrants, the Company terminated the January Financing; all shares and warrants issued thereunder were returned by the escrow holder to the Company for cancellation, and any funds received pursuant to the January Financing were returned by the escrow holder to the investors.

In March 2006, a group of European investors (collectively, the “March Investors”), lead by Olympia Holding AS, informed the Company that they were willing to invest on the same terms and conditions that were negotiated for the now-terminated January Financing, and the Company agreed to this financing transaction with the March Investors (the “March Financing”).

Pursuant to the March Financing, the Company agreed to issue 15,333,333 shares (post reverse-split) of restricted common stock under Regulation S at $0.60 per share (post reverse-split), plus warrants to purchase 16,666,667 shares (post reverse-split) of common stock with two-year exercise periods and strike prices ranging from $4.50 to $25.50 per shares (post reverse-split), as set forth below. The shares were held in escrow by Carl Hessel ("Escrow Holder"), a director and major stockholder of the Company based in Geneva, Switzerland, along with the warrants.  Pursuant to the terms of the March Financing, the first payment of $4.6 million was due immediately, with a second payment of $4.6 million due within three months thereafter.

As of March 31, 2009, the Company had received cash in the net amount $8,134,924 pursuant to the March Financing, and had issued 15,283,333 shares (post reverse-split) of common stock and warrants to purchase an additional 16,612,319 shares  (post reverse-split).  Warrants to purchase 8,278,986 shares (post reverse-split) expired on March 31, 2008, and warrants to purchase 8,333,333 shares (post reverse-split) remain outstanding at March 31, 2009, as detailed in the table below. In December 2008, the Company wrote-off to financing cost the balance in subscriptions receivable related to the March Financing in the amount of $1,131,590.

The Company also issued to consultants  1,533,333 shares (post reverse-split) of unregistered common stock and warrants to purchase an additional 4,333,333, shares (post reverse-split) of common stock at a price of $0.60 per share (post reverse-split) as a commission for work performed on the March Financing.  These warrants to purchase 4,333,333 shares (post reverse-split) expired on March 31, 2008.

F-10

The warrants issued pursuant to the investors in the March Financing are as follows:

Exercise Price		Total Number					Outstanding at
Per Share		Issued		Expired			March 31, 2009
$	4.50		4,651,449		(2,318,116	)		2,333,333
$	7.50		3,654,710		(1,821,377	)		1,833,333
$	13.50		2,325,725		(1,159,058	)		1,166,667
$	16.50		2,325,725		(1,159,058	)		1,166,667
$	19.50		2,325,725		(1,159,058	)		1,166,667
$	25.50		1,328,986		(662,319	)		666,667
			16,612,320		(8,278,986	)		8,333,334

All warrants have a two-year exercise period from the date of issuance of the warrants. No registration rights were granted to the Investors in connection with the March Financing and the shares and warrants issued in the March Financing will be restricted securities, subject to the applicable restrictions set forth in Regulation S promulgated under the Securities Act of 1933, as amended.

Sales Of Securities

During the three months ended September 30, 2008, the Company issued the following shares of common stock:

The Company issued 9,818,454 shares (post reverse-split) of common stock with a fair value of $1,572,449 to consultants for services.

The Company issued 1,000,000 shares (post reverse-split) of common stock with a fair value of $168,000 to employees for services.

The Company issued 1,100,000 shares (post reverse-split) of common stock pursuant to the exercise of options by consultants for $81,000 cash and subscriptions receivable of $18,000.

The Company issued 833,333 shares (post reverse-split) of common stock with a fair value of $125,000 to a director for services.

The Company issued 5,000,000 shares (post reverse-split) of common stock with a fair value of $750,000 to an officer pursuant to an executive compensation plan. The amount of $750,000 was accrued to common stock subscribed in a prior period.

Also during the three months ended September 30, 2008, the Company cancelled 1,333,333 shares (post reverse-split) of common stock previously subscribed.  The subscription receivable in the amount of $600,000 was written-off during the twelve months ended June 30, 2008.

During the three months ended December 31, 2008, the Company issued the following shares of common stock:

The Company issued 23,336,667 shares (post reverse-split) of common stock with a fair value of $2,245,900 to consultants and a director for services.

The Company issued 8,231,231 shares of common stock (post reverse-split) pursuant to the exercise of options by consultants for $341,011 cash.

The Company issued 600,000 shares (post reverse-split) of common stock with a fair value of $72,000 for prepaid rent.

The Company also received $384,000 cash in advance for options issued and exercised in January, 2009.  This amount is carried as common stock subscribed on the Company’s balance sheet at December 31, 2008.

During the three months ended March 31, 2009 the Company issued the following shares of common stock:

The Company issued 25,960,000 shares (post reverse-split) of common stock with a fair value of $1,879,850 to consultants for services.

The Company issued 1,450,000 shares (post reverse-split) of common stock with a fair value of $72,100 to employees for services.

The Company issued 758,000 shares of common stock (post reverse-split) pursuant to the exercise of options by consultants for $22,740 cash.

The Company issued 1,200,000 shares (post reverse-split) of common stock with a fair value of $48,000 for prepaid rent.

The Company issued 6,600,000 shares (post reverse-split) of common stock for options exercised  in a previous period for $348,000 cash.

The Company issued 10,000,000 shares (post reverse-split) of common stock for cash of $200,000.

The Company also received $304,263 cash in advance for stock subscribed but not issued.  This amount is carried as common stock subscribed on the Company’s balance sheet at March 31, 2009.

The Company also received $329,057 cash in advance for options exercised but not issued.  This amount is carried as common stock subscribed on the Company’s balance sheet at March 31, 2009.

F-11

11.  STOCK OPTIONS AND WARRANTS

Non-Employee Stock Options

The following table summarizes the changes in options outstanding and the related prices for the shares (post reverse-split) of the Company's common stock issued to the Company consultants. These options were granted in lieu of cash compensation for services performed (amounts have been adjusted to reflect the reverse stock split and other adjustments):

Range of Exercise Prices		Number of Shares Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price of Outstanding Options		Number of Shares Exercisable		Weighted Average Exercise Price of Options
$	0.45		55,555		6.5	$	0.45		55,555	$	0.45
	0.60		450,000		7.6		0.60		450,000		0.60
	1.47		252,101		4.0		1.47		252,101		1.47
	2.10		252,101		4.0		2.10		252,10		2.10
			1,009,757		5.7	$	1.18		1,009,757	$	1.18

Transactions involving stock options issued to non-employees are summarized as follows:

	Number of Shares			Weighted Average Exercise Price
Options exercisable at June 30, 2008		1,009,757		$	1.18
Granted		1,100,000			0.09
Exercised		(1,100,000	)		(0.09	)
Cancelled / Expired		-			-
Options exercisable at September 30, 2008		1,009,757		$	1.18
Granted		8,231,231			0.04
Exercised		(8,231,231	)		(0.04	)
Cancelled / Expired		-			-
Options outstanding at December 31, 2008		1,009,757		$	1.18
Granted		7,358,000			0.05
Exercised		(7,358,000	)		(0.05	)
Cancelled / Expired		-			-
Options outstanding at March 31, 2009		1,009,757		$	1.18

The non-employee stock-based compensation expense recognized in the unaudited condensed consolidated statements of operations for the nine months ended March 31, 2009 and 2008 was $6,959,224 and $5,773,901, respectively.

The weighted-average fair value of stock options granted to non-employees during the nine months ended March 31, 2009 and the weighted average significant assumptions used to determine those fair values, using a Black-Scholes option pricing model are as follows:

Significant assumptions (weighted-average):	2009			2008
Risk-free interest rate at grant date		0.32% - 3.00	%		4.75	%
Expected stock price volatility		121% - 246	%		111	%
Expected dividend payout		0			0
Expected option life (in years)		1.0			0.5

Employee Stock Options

The following table summarizes the changes to employee stock options outstanding and the related prices of the Company's common stock options issued to employees under a non-qualified stock option plan (amounts have been adjusted to reflect the reverse stock split and other adjustments):

Range of Exercise Prices		Number of Shares Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price of Outstanding Options		Number of Shares Exercisable		Weighted Average Exercise price of Exercisable options
$	0.42		166,667		8.5	$	0.42		166,667	$	8.5
	0.45		66,666		7.1		0.45		66,666		7.1
	1.41		125,000		7.0		1.41		125,000		7.0
			358,333		7.7	$	0.77		358,333	$	7.7

F-12

Transactions involving stock options issued to employees are summarized as follows:

	Number of Shares		Weighted Average Exercise Price
Options outstanding at June 30, 2008		358,333	$	0.77
Granted		-		-
Exercised		-		-
Cancelled / Expired		-		-
Options outstanding at September 30, 2008		358,333	$	0.77
Granted		-		-
Exercised		-		-
Cancelled / Expired		-		-
Options outstanding at December 31, 2008		358,333	$	0.77
Granted		-		-
Exercised		-		-
Cancelled / Expired		-		-
Options outstanding at March 31, 2009		358,333	$	0.77
Non-vested at March 31, 2009		-		-
Exercisable at March 31, 2009		358,333	$	0.77

The employee stock based compensation expense recognized in the unaudited condensed consolidated statements of operations for the nine months ended March 31, 2009 and 2008 was $0 and $33,892, respectively.

Warrants

The following table summarizes the changes in warrants outstanding and the related prices of the Company’s common stock issued to non-employees of the Company. These warrants were granted instead of cash compensation for services performed and settlement of legal dispute (amounts have been adjusted to reflect the reverse stock split and other adjustments):

Range of Exercise Prices		Number of Shares Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price of Outstanding Warrants		Number of Shares Exercisable		Weighted Average Exercise Price of Exercisable Warrants
$	2.94		214,286		3.7	$	2.94		214,286	$	2.94
$	4.50		2,333,333		0.5	$	4.50		2,333,333	$	4.50
$	7.50		1,833,333		0.5	$	7.50		1,833,333	$	7.50
$	13.50		1,166,667		0.5	$	13.50		1,166,667	$	13.50
$	16.50		1,166,667		0.5	$	16.50		1,166,667	$	16.50
$	19.50		1,166,666		0.5	$	19.50		1,166,666	$	19.50
$	25.50		666,667		0.5	$	25.50		666,667	$	25.50
			8,547,619		0.6	$	11.66		8,547,619	$	11.66

 Transactions involving stock warrants issued are summarized as follows:

	Number of Shares		Weighted Average  Exercise Price
Warrants exercisable at June 30, 2008		8,547,619	$	11.66
Granted		-		-
Exercised		-		-
Cancelled / Expired		-		-
Warrants exercisable at September 30, 2008		8,547,619	$	11.66
Granted		-		-
Exercised		-		-
Cancelled / Expired		-		-
Warrants exercisable at December 31, 2008		8,547,619	$	11.66
Granted		-		-
Exercised		-		-
Cancelled / Expired		-		-
Warrants exercisable at March 31, 2009		8,547,619	$	11.66

F-13

12. SEGMENT INFORMATION

The Company currently operates three business segments: (1) the sale of its hardware terminals and in the Dominican Republic (Dominicana); (2) transaction processing fees and hardware sales generated through its wholly owned subsidiary, Rahaxi Processing Oy; and (3) consulting services offered through its 50% owned subsidiary PLC Partners, LTD.  All intercompany transactions, including receivables and payables,  are eliminated in consolidation and from the segment amounts presented below.

	Three months ended March 31,						Nine months ended March 31,
	2009			2008			2009			2008
Sales to external customers:
Corporate	$	-		$	-		$	-		$	-
Dominicana		143,704			17,491			285,316			112,575
Rahaxi		696,457			851,539			2,198,487			2,269,825
PLC		344,644			760,120			1,323,255			2,049,958
Total sales to external customers:	$	1,184,805		$	1,629,150		$	3,807,058		$	4,432,358
Depreciation and amortization:
Corporate	$	80,100		$	81,750		$	241,531		$	243,192
Dominicana		3,137			2,773			9,782			11,784
Rahaxi		8,888			164,969			29,281			452,059
PLC		97			322			482			439
Total depreciation and amortization:	$	92,222		$	249,814		$	281,076		$	707,474
General and administrative expense:
(not including depreciation and amortization)
Corporate	$	3,155,810		$	1,558,252		$	9,387,192		$	9,413,209
Dominicana		64,415			85,117			336,513			368,013
Rahaxi		615,648			834,474			2,154,606			2,332,347
PLC		161,987			192,359			476,444			419,541
Total general and administrative expense	$	3,997,860		$	2,670,202		$	12,354,755		$	12,533,110
Capital expenditures:
Corporate	$	-		$	-		$	-		$	1,796
Dominicana		-			-			-			-
Rahaxi		-			148,900			-			391,563
PLC		-			-			-			-
Total capital expenditures	$	-		$	148,900		$	-		$	393,359
Operating income (loss):
Corporate	$	(3,235,910	)	$	(1,695,657	)	$	(9,628,723	)	$	(9,823,366	)
Dominicana		(11,729	)		(79,654	)		(205,820	)		(341,726	)
Rahaxi		(374,369	)		(768,193	)		(1,238,918	)		(2,396,606	)
PLC		(50,476	)		79,580			76,804			146,805
Total operating income (loss)	$	(3,672,484	)	$	(2,463,924	)	$	(10,996,65	)	$	(12,414,893	)
Interest Expense, Net:
Corporate	$	12,455		$	1,357		$	31,033		$	1,317
Dominicana		3,826			2,080			8,625			1,849
Rahaxi		11,569			3,223			20,379			27,245
PLC		-			-			-			-
Total interest expense	$	27,850		$	6,660		$	60,037		$	30,411
Financing cost
Corporate	$	-		$	-		$	1,131,590		$	-
Dominicana		-			-			-			-
Rahaxi		-			-			-			-
PLC		-			-			-			-
Total financing cost	$	-		$	-		$	1,131,590		$	-
Segment assets:
Corporate	$	619,128		$	2,022,822		$	619,128		$	2,022,822
Dominicana		252,653			183,949			252,653			183,949
Rahaxi		744,167			4,412,849			744,167			4,412,849
PLC		1,398,923			1,542,982			1,398,923			1,542,982
Total segment assets	$	3,014,871		$	8,162,602		$	3,014,871		$	8,162,602

F-14

13. SUBSEQUENT EVENTS

Resignation of Director

Carl Hessel submitted a letter of resignation from his position as a director with an effective date of April 2, 2009, citing personal reasons.  The letter was received by Rahaxi on April 15, 2009.  Mr. Hessel, through Margaux Investment Management Group, S.A., a company affiliated with Mr. Hessel, will continue to provide services as a consultant to Rahaxi pursuant to that certain Consulting Agreement dated August 15, 2008, filed as an exhibit to Rahaxi’s Form 10-K filed on October 14, 2008.

Private Placement of Common Stock 

On May 6, 2009, the Board of Directors approved the issuance of shares of common stock to certain executives of the Company as incentive compensation.  The Board approved the issuance of 35 million shares of common stock to Paul Egan, President and Chief Executive Officer; 25 million shares to Ciaran Egan, Chief Financial Officer, and 10 million shares to Fionn Stakelum, Director of European Operations.

Based on our stock price on the date of issuance, the shares have an aggregate value of $2,800,000, which will be recorded as an expense for executive compensation. The share issuances were made pursuant to an exemption from registration under Regulation S and/or Regulation D under the Securities Act of 1933, as amended.  The shares are restricted securities, subject to compliance with Rule 144 under the Securities Act, with respect to any resales.

Issuance of Common Stock

Subsequent to March 31, 2009,  the Company issued the following shares of common stock:

A total of 10,000,000 shares of common stock were issued to a total of six consultants for services;

A total of 129,812,000 shares of common stock  were sold for cash;

A total of 400,000 shares of common stock were issued to employees for services;

A total of 70,000,000 shares of common stock were issueed to three members of management pursuant to a long-term incentive plan;

A total of 9,360,000 shares of common stock were issued for the exercise of stock options by a consultant.

F-15

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note About Forward-Looking Statements

This Form 10-Q contains "forward looking statements" within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Exchange Act of 1934, as amended. When used in this Form 10-Q, the words "expects," "anticipates," "believes," "plans," "will" and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements regarding our adequacy of capital resources, need and ability to obtain additional financing, the features and benefits of our services, our operating losses and negative cash flow, and our critical accounting policies.

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those discussed above, as well as the risks set forth under "Risk Factors". These forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis of the Company's financial condition and results of operations is based upon, and should be read in conjunction with, its unaudited condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q.

Overview

We are a provider of electronic payment processing services, including credit and debit card transaction processing, point-of-sale related software applications and other value-added services. We currently process on average approximately 1,580,000 transactions per month and serve in excess of 1,700 merchant locations. We provide transaction processing support for all major credit cards, including Visa, MasterCard, American Express, Diners Club and JCB, and all bank-issued Finnish debit cards. We enable merchants and financial institutions to accept, and their consumers to utilize, electronic payments using credit and debit cards to purchase goods and services. Our role is to serve as an intermediary in the exchange of information and funds that must occur between parties so that a payment transaction can be completed. We provide merchants with various transaction processing services, including authorizing card transactions at the merchant’s retail location (also known as the point-of-sale), and capturing and transmitting transaction data. Through agreements with Hypercom Corporation, the world's second largest manufacturer of payment terminals, Spectra Technologies, a leading Chinese electronic payment solution provider, and Thyron Systems, we also offer our customers point-of-sale terminals, which are integrated with our software products to provide merchants with a complete solution for credit and debit card transaction processing. 

Our role in a transaction is to serve as a link between the merchant and the merchant's bank, known as the acquiring bank, and the bank that issued the consumer’s credit or debit card, known as the issuing bank. The electronic authorization process for a credit card transaction begins when the merchant "swipes" or inserts the card into its point-of-sale terminal and enters the amount of the purchase. After capturing the data, the point-of-sale terminal transmits the authorization request through our switching center, where the data is routed to the issuing bank (typically via the Interchange Network, a telecommunication network operated by international card corporations) for authorization. The issuing bank confirms that the credit card is authentic and whether a transaction will cause the cardholder to exceed defined limits. The approval or disapproval of the transaction is transmitted back to our switching center, where it is routed to the appropriate merchant’s acquiring bank.

We were originally organized on August 2, 1997, under the laws of the State of Delaware as Interstate Capital Corporation. On November 17, 1999, we merged into a newly formed Nevada corporation, Freedom Surf, Inc., for the purpose of changing the corporate domicile to Nevada. On February 24, 2003, we filed a Certificate of Amendment to our Articles of Incorporation with the Nevada Secretary of State changing our name to "Freestar Technology Corporation". On September 10, 2002, we entered into an agreement with Heroya Investments Limited for the acquisition of Rahaxi Processing Oy through a combination of cash and stock. The agreement with Heroya was subsequently amended three times to increase the stock consideration and decrease the cash component. Rahaxi, our wholly owned subsidiary, is based in Helsinki, Finland.  On November 21, 2008, we filed a Certificate of Amendment to our Articles of Incorporation with the Nevada Secretary of State changing our name to “Rahaxi, Inc” and implementing  a one-for-three reverse split of our common stock.

Management believes that our primary short-term growth opportunities will be derived from the European marketplace and a significant portion of our resources, both financial and personnel, will be directed towards developing those opportunities. We believe that our anticipated growth and ultimate profitability will depend in large part on the ability to promote our services, gain clients and expand our relationship with current clients. Accordingly, we intend to invest in marketing, strategic relationships, and development of our client base.

Our switching and transaction processing platform is operated by our wholly-owned subsidiary, Rahaxi, which is located in Finland. We are one of the leading players in the Finnish transaction processing market, serving approximately 1,700  merchants each day and processing on average approximately 1,700,000 transactions per month.

Until recently, our primary source of revenue was from transaction fees we receive from processing credit and debit card transactions through point-of-sale terminals at a merchant’s retail location. In fiscal year 2006, we also began generating revenue from sales of point-of-sale terminals as well as consulting fees, which include customization of software applications for merchants and other customers. In fiscal year 2008, the period from July 1, 2007 through June 30, 2008, transaction fees from point-of-sale terminal transactions continued to be derived primarily from merchants and customers based in Finland. We also derived revenue from transaction fees from clients in Estonia, Spain and Iceland. In addition, we derived revenue from consulting and development fees from our customers in Finland, France, the Dominican Republic and in Ireland through our 50% stake in PLC, Project Life Cycle Partners Limited.

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The Company's principal offices are in Dublin, Ireland. The Company also has offices in Helsinki, Finland and Santo Domingo, the Dominican Republic. While the Company's offices in Finland and Ireland will primarily focus on the European market, the Company's office in the Dominican Republic will continue to pursue opportunities in the Caribbean and Latin America. Management believes that these emerging markets could offer favorable opportunities in the longer term. The Company has achieved certification to become a third party services provider for China UnionPay. Through our agreement with the French bank Natixis Paiements, we processed our first live transaction for China UnionPay in June, 2008 in Paris, France.  Subject to financial resource limitations we expect to continue to pursue additional banking relationships to allow us to expand our market for China UnionPay transactions in Europe.

Results of Operations

THREE MONTHS ENDED MARCH 31, 2009  COMPARED TO THREE MONTHS ENDED MARCH 31, 2008

Revenue

For the reasons below, total revenue for the  three months ended March 31, 2009 was $1,184,805 compared to $1,629,150 for the three months ended March 31, 2008, a decrease of $444,345 or approximately 27.3%.

Transaction processing and related revenue

Transaction processing and related revenue was $404,769 for the three months ended March 31, 2009, compared to $575,002 during the prior year, a decrease of $170,233 or approximately 29.6%. The Company processed a total of 4,934,128 transactions during the three months ended March 31 2009, an increase of $886,967 or approximately 21.9% compared to 4,047,161 transactions processed during the prior period.  The increase in the number of transactions processed was primarily related to the increase in the number of clients compared to the same period of the prior year. The decrease in transaction  processing and related revenue was due to the fact that we recorded a non-recurring fee in the comparable period in the prior year of approximately  $109,000.   Also,  we have transitioned to a flat monthly pricing model for some of our new clients as opposed to the legacy per-transaction fees structure.   The Company invoices its customers in Euro, which declined in value by approximately 14% compared to the U.S. Dollar for the three months ended March 31, 2009.  This factor  should be taken into consideration when analyzing our transaction processing sales.

Consulting services revenue

Consulting services revenue was $375,077 for the three months ended March 31, 2009, compared to $760,119 during the prior year, a decrease of $385,042 or approximately 50.7%. Consulting services revenue is primarily generated by the Company’s 50% stake in PLC. The primary reasons for the decline in consulting services revenue can be attributed to the completion of projects under management during the period without comparable replacement projects being initiated, and the decline in value of the Euro compared to the U.S. dollar.

Hardware and related  revenue

Hardware and related revenue was $404,959 during the three months ended March 31, 2009, compared to $294,029 during the prior period, an increase of $110,930 or approximately 37.7%.  The primary reason for the increase in hardware related revenue is the continued rollout of the Company’s hardware products to an expanding client base. 

We expect increases in transaction processing and related revenue together with hardware and related revenue throughout the next twelve months  as we continue to increase our client base and service offerings, such as China UnionPay transactions in France, EMV transaction processing, dynamic currency conversion, sales of point of sale terminals and consulting fees.  Due to the global economic downturn and the budgetary constraints of potential clients (particularly in Ireland) ,we see a decrease in consulting services over the next six months and remain cautiously optimistic for the six months following that.  However, there can be no guarantee that our products will be accepted in the marketplace or that our sales efforts will be successful

All of our revenue for the three months ended March 31, 2009 has been derived from a limited number of customers, primarily Finnish customers for our transaction processing products. Approximately 57% of our total revenue was attributable to our ten largest customers. The future loss of any major customer could have a material adverse effect on our business, financial condition and results of operations. We believe that this customer concentration will continue for much of the fiscal year ending June 30, 2009. We believe that this customer concentration will be gradually diluted in the latter half of the fiscal year ending June 30, 2009 as we continue to pursue operations outside of Finland. All of our revenues for the three months ended March 31, 2009 have been generated by our operations outside of the United States, and our future growth rate is, in part, dependent on continued growth in international markets. We expect this to continue through the fiscal year ending June 30, 2009.

Cost of Revenue

Cost of transaction processing and related revenue

Cost of transaction processing and related revenue was $367,804 for the three months ended March 31, 2009, compared to $623,110 for the prior three months ended March 31, 2008, a decrease of $255,306  or approximately 41.0%. The primary reason for the decrease is related to the elimination of the amortization of capitalized software from cost of good sold as a result of the software impairment charge recorded during the fourth quarter of fiscal 2008.  Amortization of capitalized software costs  was $135,096 during the three months ended March 31, 2008.  The Company also experienced a reduction in development expenses as projects were completed and new products were brought to market.  It is important to note that many of our costs associated with maintaining and improving our processing and customer support capabilities are charged to cost of revenue, but these costs do not always change in direct relation to sales.

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Cost of consulting services

Cost of consulting services revenue was $233,036 for the three months ended March 31, 2009, compared to $487,860 for the  three months ended March 31, 2008, a decrease of $254,824 or approximately 52.2%.  The primary reason for the decrease was that as various stages of projects came to completion, fewer contractors were needed and therefore there was a reduction in contractor fees.

Cost of hardware and related  revenue

Cost of hardware and related revenue was $166,367  during the three months ended March 31, 2009, compared to $207,402 during the prior period, a decrease of $41,035 or approximately 19.8%. The primary reason for the decrease was the reduction in the number of test units and replacement units sent to customers.

For the reasons stated above,  cost of revenue for the three months ended March 31, 2009 was $767,207 compared to $1,318,372 for the three months ended March 31, 2008, a decrease of $551,165 or approximately 41.8%.  Gross margin on sales for the three months ended March 31, 2009 was $417,598 or approximately 35.2% of sales, compared to gross margin on sales for the three months ended March 31, 2008 of $310,778 or approximately  19.1%.

We expect cost of revenue to increase in the coming year as we continue our current trend of increasing sales and expanding our product offering. As our service offerings and business mix changes, gross margin as a percent of sales may not remain constant.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $4,090,082  for the three months ended March 31, 2009 compared to $2,774,702 for the three months ended March 31, 2008, an increase of $1,315,380  or approximately 47.4%. The primary components of selling, general, and administrative expenses for the three months ended March 31,  2009 were: consulting fees of $2,530,950 to service providers for financial consulting and other professional services; $2,501,062 this amount consisted of non-cash compensation in the form of stock, stock options, and warrants.  Other components of selling, general, and administrative expenses were payroll and related costs of $983,610 (including $72,100 of non-cash compensation costs); facility costs  (rent, telephone, utilities, and maintenance) of $211,911;  travel and entertainment costs of $177,435; and depreciation and amortization of $93,959; recruiting costs of $26,977; and freight and delivery costs of $12,436.

The amount of future selling, general, and administrative expenses will largely depend on the pace of our growth in the market for payment processing products and upon the cost of outside services and professional fees, including legal fees relating to litigation and acquisitions. We fully expect these costs to increase as we continue our expected rollout of product offerings. We also intend to continue to build out our infrastructure, which may include adding support staff and branch offices. Selling expenses may also continue to increase due to increased focus on obtaining new customers. In addition, we may pursue further acquisitions in order to facilitate our growth and exploit market opportunities, which would further drive up legal and accounting fees, payroll, and travel costs.

Interest Expense

Interest income (expense) net was ($27,850) for the three months ended March 31, 2009, compared to ($6,660)  for the three months ended March 31, 2008, an increase of ($21,190) or approximately  318.2%. The increase is due primarily to an increase in notes payable outstanding, including the 6% Short Term Notes described above.   

Historically, we have primarily utilized equity financing partly in order to avoid the interest charges associated with debt financing.  However, as described above, we recently utilized debt financing as well, although we expect equity financing to continue to comprise the bulk of our financing. The recent price and performance of our common stock could make equity financings more difficult, and require us to pursue alternative methods of financing our cash needs. In addition, we could receive an offer of attractive debt financing or could undertake additional financing with regard to an acquisition, in which cases interest expense would significantly increase.

Net Loss

For the reasons stated above, we recorded a net loss of $3,675,124  for the three months ended March 31, 2009 compared to $2,510,373 for the three months ended March 31, 2008, an increase of $1,164,751 or approximately 46.4%.

NINE MONTHS ENDED MARCH 31, 2009 COMPARED TO NINE MONTHS ENDED MARCH 31, 2008

Revenue

For the reasons below, total revenue for the  nine months ended March 31, 2009 was $3,807,058 compared to $4,432,358 for the nine months ended March 31, 2008, a decrease of $625,300 or approximately 14.1%.

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Transaction processing and related revenue

Transaction processing and related revenue was $1,463,531 for the nine months ended March 31, 2009, compared to $1,575,507 during the prior period, a decrease of $111,976 or approximately 7.1%. The Company processed a total of  16,005,950  transactions during the nine months ended March 31, 2009, an increase of 1,772,931  or approximately 12.5% compared to 14,233,019 transactions processed during the prior period.  The increase in the number of transactions processed was primarily related to the increase in the number of clients compared to the same period of the prior year. The Company invoices its customers in Euro, which increase in value by approximately 4.4% compared to the Euro for the nine months ended March 31, 2009, and this factor  should be taken into consideration when analyzing our transaction processing sales. The decrease in transaction  processing and related revenue was due to the fact that we recorded a  non-recurring fee in the comparable period in the prior year of approximately $109,000; in addition, we have transitioned to a flat monthly pricing model for some of our new clients as opposed to the legacy per-transaction fees structure.

Consulting services revenue

Consulting services revenue was $1,416,653 for the nine months ended March 31, 2009, compared to $2,049,958 during the prior period, a decrease of $633,305 or approximately 30.9%. Consulting services revenue is primarily generated by the Company’s 50% stake in PLC. The primary reasons for the decline in consulting services revenue can be attributed to the completion of projects under management during the period, the global economic downturn and the budgetary constraints of potential clients (particularly in Ireland)  and the decline in the Euro compared to the U.S. dollar.

Hardware and related  revenue

Hardware and related revenue was $926,874 during the nine months ended March 31, 2009, compared to $806,893 during the prior period, an increase of $119,981 or approximately 14.9%.  The primary reason for the increase in hardware related revenue is the continued rollout of the Company’s hardware products to an expanding client base.

We expect revenue levels to increase throughout the next twelve months as we continue to increase our client base and service offerings, such as China UnionPay transactions in France, EMV transaction processing, dynamic currency conversion, sales of point of sale terminals and consulting fees. However, there can be no guarantee that our products will be accepted in the marketplace or that our sales efforts will be successful.

All of our revenue for the nine months ended March 31, 2009 has been derived from a limited number of customers, primarily Finnish customers, for our transaction processing products. Approximately  57% of our total revenue was attributable to our ten largest customers. The future loss of any major customer could have a material adverse effect on our business, financial condition and results of operations. We believe that this customer concentration will continue for much of the fiscal year ending June 30, 2009. We believe that this customer concentration will be gradually diluted in the latter half of the fiscal year ending June 30, 2009 as we continue to pursue operations outside of Finland. All of our revenues for the nine months ended March 31, 2009 have been generated by our operations outside of the United States, and our future growth rate is, in part, dependent on continued growth in international markets. We expect this to continue through the fiscal year ending June 30, 2009.

Cost of Revenue

Cost of transaction processing and related revenue

Cost of transaction processing and related revenue was $995,111 for the nine months ended March 31, 2009, compared to $1,866,738 for the prior nine months ended March 31, 2008, a decrease of $871,627 or approximately 46.7%. The primary reason for the decrease is related to the elimination of the amortization of capitalized software from cost of good sold as a result of the software impairment charge recorded during the fourth quarter of fiscal 2008.  Amortization of capitalized software costs  was $400,303 during the nine months ended March 31, 2008.  The Company also experienced a reduction in development expenses as projects were completed and new products were brought to market.  It is important to note that many of our costs associated with maintaining and improving our processing and customer support capabilities are charged to cost of revenue, but these costs do not always change in direct relation to sales.

Cost of consulting services

Cost of consulting services revenue was $769,525 for the nine months ended March 31, 2009, compared to $1,483,174 for the  nine months ended March 31, 2008, a decrease of $713,649 or approximately 48.1%.  The primary reason for the decrease was that as various stages of projects came to completion, fewer contractors were needed and therefore there was a reduction in contractor fees.

Cost of hardware and related  revenue

Cost of hardware and related revenue was $403,248 during the nine months ended March 31, 2009, compared to $657,057 during the prior year, a decrease of $253,809  or approximately 38.6%. The primary reason for the decrease was the reduction in actual hardware and related revenue caused by insufficient inventory levels.

For the reasons above, total cost of sales for the nine months ended March 31, 2009 was $2,167,884 compared to $4,006,969 for the  nine months ended March 31, 2008, a decrease of $1,839,085 or approximately 45.9%.  Gross margin on sales for the nine months ended March 31, 2009 was $1,639,174 or approximately 43.1% of sales, compared to gross margin on sales for the nine months ended March  31, 2008 of $425,389 or approximately 9.6% of sales.

We expect cost of revenue to decrease in the coming year as we have completed major software development work, and continue our current trend of increasing sales and expanding our product offering. As our service offerings and business mix changes, gross margin as a percent of sales may not remain constant.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses were $12,635,831  for the nine months ended March 31, 2009 compared to $12,840,282 for the nine months ended March 31, 2008, a decrease of $204,451  or approximately 1.6%. The primary components of selling, general, and administrative expenses for the nine months ended March 31, 2009 were: Consulting fees of $7,228,701 to service providers for financial consulting and other professional services; $7,036,317 of this amount consisted of non-cash compensation in the form of stock, stock options, and warrants.  Other components of selling, general, and administrative expenses were payroll and related costs of $3,553,454, including $365,100 of non-cash compensation in the form of stock grants; facility costs  (rent, telephone, utilities, and maintenance) of $713,533; travel and entertainment costs of $399,670;  legal and accounting fees of  $282,808;  depreciation and amortization of $281,076;  advertising and marketing of $33,808; recruiting of $26,977; licenses and dues of $26,540; and  repair and maintenance of $25,673.

The amount of future selling, general, and administrative expenses will largely depend on the pace of our growth in the market for payment processing products and upon the cost of outside services and professional fees, including legal fees relating to litigation and acquisitions. We fully expect these costs to increase as we continue our expected rollout of product offerings. We also intend to continue to build out our infrastructure, which may include adding support staff and branch offices. Selling expenses may also continue to increase due to increased focus on obtaining new customers. In addition, we may pursue further acquisitions in order to facilitate our growth and exploit market opportunities, which would further drive up legal and accounting fees, payroll, and travel costs.

Financing Cost

During the nine months ended  March 31, 2009, the Company wrote-off subscriptions receivable in the amount of $1,131,590. This amount represents shares issued pursuant to a financing transaction entered into in March, 2006.  The Company has received a total of $8,134,924 pursuant to this financing transaction through March 31, 2009.  There was no such write-off during the corresponding period of the prior year.

Interest Expense

Interest income (expense) net was ($60,037) for the nine months ended March 31, 2009, compared to ($37,071)  for the nine months ended March 31, 2008, an increase of ($22,966) or approximately  62%. The increase is due primarily to an increase in notes payable during the current period, partially offset by a decrease in vendor financing charges.  

Historically, we have primarily utilized equity financing partly in order to avoid the interest charges associated with debt financing. However, as described above, we recently utilized debt financing as well, although we expect equity financing to continue to comprise the bulk of our financing. The recent price and performance of our common stock could make equity financings more difficult, and require us to pursue alternative methods of financing our cash needs. In addition, we could receive an offer of attractive debt financing or could undertake additional financing with regard to an acquisition, in which cases interest expense would significantly increase.

Net Loss

For the reasons stated above, we recorded a net loss of $12,226,686 for the nine months ended March 31, 2009 compared to $12,717,921 for the nine months ended March 31, 2008, a decrease of $491,235 or approximately 3.9%.

We may continue to incur losses on both a quarterly and annual basis. In addition, we expect to continue to incur significant costs of services and substantial operating expenses. Therefore, we will need to significantly increase revenues to achieve profitability and a positive cash flow. We may not be able to generate sufficient revenues to achieve profitability. We expect losses to continue for at least the next twelve months.

Operating Activities

The net cash used in operating activities was $3,138,358 for the nine  months ended March 31, 2009 compared to $3,092,865 for the nine months ended March 31, 2008, an increase of $45,493 or approximately 1.5%.  The primary components of cash used in operating activities during the current period are the net loss of ($12,226,686), partially offset by the non-cash charges of non-cash compensation of $7,401,416, non-cash financing cost of $1,131,590; and depreciation and amortization of $281,076.  The total amount of cash used in operating activities was also increased or (decreased) by the following changes in the  components of working capital:  accounts receivable of $543,757; inventory of $278,597; other current assets of $26,075; accounts payable and accrued expenses of ($648,261); deferred revenue of ($44,743);  and accrual of salary to officers of $108,844.   

Investing Activities

Net cash used in investing activities was $0 during the nine months ended March 31, 2009 compared to $393,359 for the nine months ended March 31, 2008, a decrease of $393,359 or 100%.  During the current period, the Company curtailed its development activities as many of  its current projects have been completed.

Financing Activities

Net cash provided by financing activities was $2,326,927 for the nine months ended March 31, 2009, compared to $3,497,827 for the nine months ended March 31, 2008, a  decrease of $1,170,900  or approximately 33.5%.  The reason for the decrease was a decrease in cash provided from the sales of common stock of $460,737, a decrease in cash received from the exercise of stock options and warrants of $1,104,299, and a decrease in cash contributed by the officer of a subsidiary of $216,864. The Company raised $611,000 during the nine months ended March 31, 2009 via a short-term loan from a director in the amount of $300,000 and other short-term loans in the aggregate amount of $311,000.

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Liquidity and Capital Resources

As of March 31, 2009, we had total current assets of $1,362,901 and total current liabilities of $5,165,092 , resulting in a working capital deficiency of $3,802,191.  We had cash and cash equivalents of $423,350 at March 31, 2009, and an accumulated deficit of $109,796,498.

On January 27, 2006, the Company signed subscription agreements with a group of offshore investors for the sale of an aggregate of $9.2 million in Company common stock, plus warrants (the “January Financing”). Due to the failure of the investment group to timely fund in full the first payment required for the purchase of shares and warrants, the Company terminated the January Financing; all shares and warrants issued thereunder were returned by the escrow holder to the Company for cancellation, and any funds received pursuant to the January Financing were returned by the escrow holder to the investors.

In March 2006, a group of European investors (collectively, the “March Investors”), lead by Olympia Holding AS, informed the Company that they were willing to invest on the same terms and conditions that were negotiated for the now-terminated January Financing, and the Company agreed to this financing transaction with the March Investors (the “March Financing”).

Pursuant to the March Financing, the Company agreed to issue 15,333,333 shares (post reverse split) of restricted common stock under Regulation S at $0.60 per share (post reverse split), plus warrants to purchase 16,666,667 shares (post reverse split) of common stock with two-year exercise periods and strike prices ranging from $1.50 to $8.50, as set forth below. The shares were held in escrow by Carl Hessel ("Escrow Holder"), a director and major stockholder of the Company based in Geneva, Switzerland, along with the warrants.  Pursuant to the terms of the March Financing, the first payment of $4.6 million is due immediately, with a second payment of $4.6 million due within three months thereafter.

As of March 31, 2009, the Company had received cash in the net amount $8,134,924 pursuant to the March Financing, and had issued 15,283,333 shares (post reverse split) of common stock and warrants to purchase an additional 16,612,219 shares (post reverse split).  Warrants to purchase 8,278,986 shares (post reverse split) expired on March 31, 2008, and warrants to purchase 8,333,333 shares (post reverse split) remain outstanding at December 31, 2008. During the three months ended December 31, 2008, the Company wrote-off to financing cost the balance in subscriptions receivable related to the March Financing in the amount of $1,131,590.

In July and August  2008, the Company signed four notes payable (the “6% Short Term Notes”) in the aggregate principal amount of $611,000. The 6% Short Term Notes are due six months from the date of the notes, and bear interest at the rate of 6% per annum.  The Company has the option to either repay the principal and accrued interest due under the 6% Short Term Notes in cash or in common stock. If paid in the form of common stock, the price will be 80% of the closing price of the Company’s common stock on the date of the notes.   During the six months ended December 31, 2008, the Company accrued interest in the amount of  $14,518 on the 6% Short Term Notes.   At March 31, 2009, the principal and accrued interest of the 6% Short Term Notes are convertible into a total of 4,996,772 shares (post reverse split) of the Company’s common stock.

The independent auditor's report on the Company's June 30, 2008 financial statements included in our Annual Report states that the Company's recurring losses raise substantial doubts about the Company's ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company continues as a going concern that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the ability of the Company to continue as a going concern on a longer-term basis will be dependent upon its ability to generate sufficient cash flow from operations to meet its obligations on a timely basis, to obtain additional financing, and ultimately, attain profitability.

Management plans to continue raising additional capital through a variety of fund raising methods during the fiscal year ending June 30, 2009 and to pursue all available financing alternatives in this regard. Management may also consider a variety of potential partnership or strategic alliances to strengthen its financial position. Although the Company has been successful in the past in raising capital, no assurance can be given that these sources of financing will continue to be available to us and/or that demand for our equity/debt instruments will be sufficient to meet our capital needs, or that financing will be available on terms favorable to the Company. The recent price and performance of our common stock could have a material adverse effect on our ability to obtain equity financing. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. If funding is insufficient at any time in the future, the Company may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of its planned product development and marketing efforts, any of which could have a negative impact on its business and operating results. In addition, insufficient funding may have a material adverse effect on the Company's financial condition, which could require the Company to:

w	curtail operations significantly;
w	sell significant assets;

w	seek arrangements with strategic partners or other parties that may require us to relinquish significant rights to products,
w	technologies or markets; or

w explore other strategic alternatives including a merger or sale.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders.

6

Certain Indebtedness and Transactions

Paul Egan and Ciaran Egan have delayed payment of a portion of their salary in order to conserve our cash. At March 31, 2009, $359,771  and $82,889  of accrued salaries were owed to Paul Egan and Ciaran Egan, respectively.  

Paul Egan and Ciaran have also advanced the funds to the Company. These advances accrue interest at the rate of 7% per annum.  At March 31, 2009, the Company owed the amount of $248,997 and $63,973 to Paul Egan and Ciaran Egan, respectively, for advances;  plus $22,289 and $3,857 to Paul Egan and Ciaran Egan, respectively, for accrued interest.

Pursuant to Paul Egan’s and Ciaran Egan’s employment agreements, the Company provides the officers a car allowance. These allowance have not been paid during the nine months ended March 31, 2009, and the amounts of $45,395 to Paul Egan and $45,395 to Ciaran Egan have been accrued at March  31, 2009.

During the nine months ended March 31, 2009, the Company received a loan in the amount of $300,000 from a director (see note 8 of the accompanying financial statements).  At March 31, 2009, the accrued interest on this loan is $10,487.  The combined principal and interest at March 31, 2009, of $310,487 is convertible at the Company’s discretion into shares (post reverse split) of the Company’s common stock at the rate of $0.12 per share (post reverse split), which would result in the issuance of 2,587,392 shares (post reverse split).   This note, along with interest accrued at the rate of 6% is due on August 10, 2009.

During the nine months ended March 31, 2009, the Company issued 6,660,000 shares of common stock valued at $632,700 to a director for services.

Exchange Rates

Our operations are principally conducted in Finland through our subsidiary Rahaxi, which operates in its local currency, the Euro. We also have operations in the Dominican Republic under the name ePayLatina S.A., and Rahaxi Dominicana, Inc. operating in its local currency, the Dominican Republic Peso. All assets and liabilities are translated at exchange rates in effect at the end of the year. Accounts for consolidated statements of operations are translated at weighted average rates for the year. Exchange rates had a material negative impact on our revenue for the three and nine months ended March 31, 2009. Gains and losses from translation of foreign currency into U.S. dollars are included in other comprehensive income (loss). The accumulated foreign currency translation adjustment was $45,445 and $249,413 for the three and nine months ended March 31, 2009.

A significant portion of our revenues and expenses is denominated in currencies other than U.S. dollars; Rahaxi generates its revenue in Euros. Any significant change in exchange rates may have a favorable or negative effect on both our revenues and operational costs. In particular, the value of the U.S. dollar to the Euro impacts our operating results. Our expenses are not necessarily incurred in the currency in which revenue is generated, and, as a result, we are required from time to time to convert currencies to meet our obligations. In addition, a significant portion of our financial statements are prepared in Euro and translated to U.S. dollars for consolidation.

Inflation

The impact of inflation on our costs, and the ability to pass on cost increases to our customers over time is dependent upon market conditions. We are not aware of any inflationary pressures that have had any significant impact on our operations over the past fiscal year, and we do not anticipate that inflationary factors will have a significant impact on future operations.

Off-Balance Sheet Arrangements

We do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.

Other

We do not provide post-retirement or post-employment benefits requiring charges under Statements of Financial Accounting Standards No. 106 and No. 112.

Critical Accounting Policies

The SEC has issued Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" ("FRR 60"), suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical accounting policies include: (a) use of estimates in the preparation of financial statements; (b) stock-based compensation arrangements; (c) revenue recognition; and (d) long-lived assets. The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results we report in our financial statements.

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(a) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Company bases its estimates on historical experience and on various other assumptions that is believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

(b) STOCK-BASED COMPENSATION ARRANGEMENTS

The Company intends to issue shares of common stock to various individuals and entities for management, legal, consulting and marketing services. These issuances will be valued at the fair market value of the service provided and the number of shares issued is determined, based upon the open market closing price of common stock as of the date of each respective transaction. These transactions will be reflected as a component of selling, general and administrative expenses in the accompanying statement of operations.

(c) REVENUE RECOGNITION

The Company recognizes revenues from contracts in which the Company provides only consulting services as the services are performed. The contractual terms of the agreements dictate the recognition of revenue by the Company.   Payments received in advance are deferred until the service is provided.

Contract costs include all direct equipment, material, and labor costs and those indirect costs related to contract performance, such as indirect labor. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in contract performance, contract conditions, and estimated profitability that may result in revisions to costs and income are recognized in the period in which the revisions are determined.

For revenue from product sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which superseded SAB No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. SAB No. 104 incorporates Emerging Issues Task Force ("EITF") No. 00-21, "Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing EITF No. 00-21 on the Company's consolidated financial position and results of operations was not significant. This issue addresses determination of whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting. EITF No. 00-21 became effective for revenue arrangements entered into in periods beginning after June 15, 2003. For revenue arrangements occurring on or after August 1, 2003, the Company revised its revenue recognition policy to comply with the provisions of EITF No. 00-21.

For those contracts which contain multiple deliverables, management must first determine whether each service, or deliverable, meets the separation criteria of EITF No. 00-21. In general, a deliverable (or a group of deliverables) meets the separation criteria if the deliverable has standalone value to the customer and if there is objective and reliable evidence of the fair value of the remaining deliverables in the arrangement. Each deliverable that meets the separation criteria is considered a "separate unit of accounting." Management allocates the total arrangement consideration to each separate unit of accounting based on the relative fair value of each separate unit of accounting. The amount of arrangement consideration that is allocated to a unit of accounting that has already been delivered is limited to the amount that is not contingent upon the delivery of another separate unit of accounting. After the arrangement consideration has been allocated to each separate unit of accounting, management applies the appropriate revenue recognition method for each separate unit of accounting as described previously based on the nature of the arrangement. All deliverables that do not meet the separation criteria of EITF No. 00-21 are combined into one unit of accounting, and the appropriate revenue recognition method is applied.

Processing fee revenue is earned based upon the actual number of transactions processed through the Company's processing system. Transaction processing fees are recognized in the period that the service is performed. These fees are typically charged on a per transaction basis, depending on the arrangement with the customer.

(d) LONG-LIVED ASSETS

Long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less the cost to sell.

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ITEM 3.  QUALITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Foreign Currency Risk

Information required by this Item is not required for smaller reporting companies.  Note generally, that in the normal course of business, operations of the Company are exposed to risks associated with fluctuations in foreign currency exchange rates. Overall, the Company is a net recipient of currencies other than the U.S. dollar and, as such, benefits from a weaker dollar and is adversely affected by a stronger dollar relative to major currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may negatively affect the Company's consolidated sales and gross margins as expressed in U.S. dollars.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, 2009 our management carried out an evaluation, under the supervision of our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our system of disclosure controls and procedures pursuant to the Securities and Exchange Act, Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation and due to the material weakness existing in our internal controls as of June 30, 2008 (described below) which has not been fully remediated as of March 31, 2009, we have concluded that as of March 31, 2009, our disclosure controls and procedures were ineffective.

Changes in internal controls

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Significant Deficiencies In Disclosure Controls And Procedures Or Internal Controls

We have determined there were errors in accounting for the status of certain shares of the Company’s common stock which had been issued pursuant to a financing agreement. The Company previously reported that these shares of stock had been held in escrow, when in fact these shares were improperly in the possession of third parties.

The Company completed its review in order to design enhanced controls and procedures to remedy this deficiency, and determined that such escrows should be avoided in the future where possible, or an outside third-party escrow should be utilized. The Company is not aware of any other deficiencies in its system of disclosure controls and procedures.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject to certain legal proceedings as reported in Part II, Item 1 - "Legal Proceedings" in the Company's Form 10-K filed with the SEC on October 14, 2008, and as updated in its quarterly reports filed on Form 10-Q.  During the three months ended March 31, 2009, there were no material changes to the legal proceeding or investigations reported in such reports; however, one new legal proceeding was initiated against the Company, described below. 

Estate of Jyrki Matikainen

On May 19, 2009, in Helsinki District Court, a judgment was imposed by the Court against Rahaxi Processing Oy, a subsidiary of Rahaxi Inc. based in Helsinki, Finland, in favor of the estate of a former employee (now deceased), Jyrki Matikainen.  Mr. Matikainen’s claim was for wrongful termination of his employment by Rahaxi Processing Oy.  Mr. Matikainen’s estate claimed that the Company did not provide written warning before termination and did not have adequate grounds for termination.  The court ordered Rahaxi Processing Oy to pay to Mr. Matikainen’s estate compensation of six months salary, for a total of approximately $86,000 and costs of approximately $19,500, plus interest.

The Company will, however, be appealing the ruling and it will lodge a written appeal with the Helsinki Appeals Court by the 18th June 2009.   In light of our decision to appeal this matter, it remains in litigation and there can be no assurance as to the outcome of the lawsuit.

ITEM 1A. RISK FACTORS

The operating results of the Company can vary significantly depending upon a number of factors, many of which are outside the Company's control. General factors that may affect the Company's operating results include:

w market acceptance of and changes in demand for products and services;

w a small number of customers account for, and may in future periods account for, substantial portions of the Company's revenue, and revenue could decline because of delays of customer orders or the failure to retain customers;

w gain or loss of clients or strategic relationships; 

w announcement or introduction of new services and products by the Company or by its competitors; 

w price competition; 

w the ability to upgrade and develop systems and infrastructure to accommodate growth; 

w the ability to introduce and market products and services in accordance with market demand; 

w changes in governmental regulation; and 

w reduction in or delay of capital spending by clients due to the effects of terrorism, war and political instability. 

The Company believes that any future growth and profitability will depend in large part on the ability to promote its services, gain clients and expand its relationship with current clients. Accordingly, the Company intends to invest in marketing, strategic partnerships, and development of its client base. If the Company is not successful in promoting its services and expanding its client base, this may have a material adverse effect on its financial condition and the ability to continue to operate the business.

The Company is also subject to the following specific factors that may affect the Company's operating results:

OPERATING LOSSES; REQUIREMENT FOR ADDITIONAL FUNDING

We have a history of operating losses and we may not be able to meet our obligations or continue operating as a going concern without attracting additional capital. In light of the net losses experienced by us, there can be no assurance that we will be profitable. If we are not profitable, we may not be able to meet our obligations or continue operating as a going concern without attracting additional capital. It is also possible that additional capital may not be available to us. The recent price of our common stock could have a material adverse impact on our ability to obtain equity financing.  If additional capital is required and is not available, we may not be able to continue operating as a going concern.

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COMPETITION

The market for electronic payment systems and electronic POS systems is intensely competitive and we expect competition to continue to increase. The Company's competitors for POS systems include VeriFone and Ingenico, amongst others, and companies such as Global Payments, First Data and Euroconnex for the Company's electronic payment software. In Finland, the company faces competition from companies such as Point, which is the largest terminal vendor in the Finnish market, as well as companies such as Screenway and Altdata, which are Point of Sale software vendors. In addition, the companies with whom we have strategic relationships could develop products or services that compete with the Company's products or services. In addition, some competitors in the Company's market have longer operating histories, significantly greater financial, technical, marketing and other resources, and greater brand recognition than the Company does. The Company also expects to face additional competition as other established and emerging companies enter the market for electronic payment solutions. To be competitive, the Company believes that it must, among other things, invest significant resources in developing new products, improve its current products and maintain customer satisfaction. Such investment will increase the Company's expenses and affect its profitability. In addition, if it fails to make this investment, the Company may not be able to compete successfully with its competitors, which could have a material adverse effect on its revenue and future profitability.  

TECHNOLOGICAL AND MARKET CHANGES

The markets in which the Company competes are characterized by rapid technological change, frequent new product introductions, evolving industry standards and changing needs of customers. There can be no assurance that the Company's existing products will continue to be properly positioned in the market or that the Company will be able to introduce new or enhanced products into the market on a timely basis, or at all. Currently, the Company is focusing on upgrading and introducing new products. There can be no assurance that enhancements to existing products or new products will receive customer acceptance. As competition in the electronic payments industry increases, it may become increasingly difficult for the Company to be competitive.

Risks associated with the development and introduction of new products include delays in development and changes in payment processing, and operating system technologies that could require the Company to modify existing products. There is also the risk to the Company that there may be delays in initial shipments of new products. Further risks inherent in new product introductions include the uncertainty of price-performance relative to products of competitors, competitors' responses to the introductions and the desire by customers to evaluate new products for longer periods of time. Further, the Company expects that its future revenue will be significantly affected by the timing and success of the introduction and roll-out of new products and services.

NEW VERSIONS OF COMPANY'S PRODUCTS MAY CONTAIN ERRORS OR DEFECTS

The Company's electronic payment software products and point of sale devices are complex and, accordingly, may contain undetected errors or failures when first introduced or as new versions are released. This may result in the loss of, or delay in, market acceptance of the Company's products. The Company has in the past discovered software errors in its new releases and new products after their introduction. The Company has experienced delays in release, lost revenues and customer frustration during the period required to correct these errors. The Company may in the future discover errors and additional scalability limitations in new releases or new products after the commencement of commercial shipments or be required to compensate customers for such limitations or errors, as a result of which the Company's business, cash flow, financial condition and results of operations could be materially adversely affected.

NO ASSURANCE OF SUCCESSFUL AND TIMELY PRODUCT DEVELOPMENT

The Company's products and proposed enhancements are at various stages of development and additional development and testing will be required in order to determine the technical feasibility and commercial viability of the products. There can be no assurance that the Company's product development efforts will be successfully completed. The Company's proposed development schedule may be affected by a variety of factors, many of which will not be within the control of the Company, including technological difficulties, access to proprietary technology of others, delays in regulatory approvals, international operating licenses, and the availability of necessary funding. In light of the foregoing factors, there can be no assurance that the Company will be able to complete or successfully commercialize new products. The inability of the Company to successfully complete the development of new products or to do so in a timely manner, could force the Company to scale back operations, or cease operations entirely.

MARKET ACCEPTANCE

The Company's success is dependent on the market acceptance of its products. Market acceptance of the Company's products will be dependent, among other things, upon quality, ease of use, speed, reliability, and cost effectiveness. Even if the advantages of the Company's products are established, the Company is unable to predict how quickly, if at all, the products will be accepted by the marketplace.

PROTECTION OF PROPRIETARY RIGHTS

The Company's success and ability to compete will be dependent in part on the protection of its potential patents, trademarks, trade names, service marks and other proprietary rights. The Company intends to rely on trade secret and copyright laws to protect the intellectual property that it plans to develop, but there can be no assurance that such laws will provide sufficient protection to the Company, that others will not develop services that are similar or superior to the Company's, or that third parties will not copy or otherwise obtain and use the Company's proprietary information without authorization. In addition, certain of the Company's know-how and proprietary technology may not be patentable.

The Company may rely on certain intellectual property licensed from third parties, and may be required to license additional products or services in the future. There can be no assurance that these third party licenses will be available or will continue to be available to the Companion acceptable terms or at all. The inability to enter into and maintain any of these licenses could have a material adverse effect on the Company's business, financial condition or operating results.

There is a risk that some of the Company's products may infringe the proprietary rights of third parties. In addition, whether or not the Company's products infringe on proprietary rights of third parties, infringement or invalidity claims may be asserted or prosecuted against it and it could incur significant expense in defending them. If any claims or actions are asserted against the Company, it may be required to modify its products or seek licenses for these intellectual property rights. The Company may not be able to modify its products or obtain licenses on commercially reasonable terms, in a timely manner or at all. The Company's failure to do so could have a negative affect on its business and revenues.

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DEPENDENCE ON SUPPLIERS

The Company depends upon a number of suppliers for components of its products. There is an inherent risk that certain components of the Company's products will be unavailable for prompt delivery or, in some cases, discontinued. The Company only has limited control over any third-party manufacturer as to quality controls, timeliness of production, deliveries and various other factors. Should the availability of certain components be compromised, it could force the Company to develop alternative designs using other components, which could add to the cost of goods sold and compromise delivery commitments. If the Company is unable to obtain components in a timely manner, at an acceptable cost, or at all, the Company may need to select new suppliers or redesign or reconstruct processes used to build its products. In such an instance, the Company would not be able to manufacture any security devices for a period of time, which could materially adversely affect its business, results from operations, and financial condition.

KEY PERSONNEL

The Company's success is largely dependent on the personal efforts and abilities of its senior management. The loss of certain members of the Company's senior management, including the Company's chief executive officer, chief financial officer and chief technical officer, could have a material adverse effect on the Company's business and prospects.

As needed from time to time, the Company may continue to recruit employees who are skilled in e-commerce, payment, funds management, payment reconciliation, Internet and other technologies. The failure to recruit these key personnel could have a material adverse effect on the Company's business. As a result, the Company may experience increased compensation costs that may not be offset through either improved productivity or higher revenue. There can be no assurances that we will be successful in retaining existing personnel or in attracting and recruiting experienced qualified personnel.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION

The Company's articles of incorporation and bylaws include provisions to the effect that we may indemnify any director, officer, or employee, as well as limit the liability of such persons. In addition, provisions of Nevada law provide for such indemnification, as well as for a limitation of liability of our directors and officers for monetary damages arising from a breach of their fiduciary duties. Any limitation on the liability of any director or officer, or indemnification of any director, officer, or employee, could result in substantial expenditures being made by the Company in covering any liability of such persons or in indemnifying them.

LITIGATION

As described under Legal Proceedings in our Form 10-K for the fiscal year ended June 30, 2008, the Company is subject to one lawsuit. From time to time, the Company is involved in a variety of claims, suits, investigations and proceedings arising from the operation of the Company's business. It is possible that such a matter could arise in the future and be resolved in a manner that ultimately would have a material adverse impact on the Company's business, and could negatively impact its revenues, operating margins, and net income.

IMPLEMENTATION OF SECTION 404 OF THE SARBANES-OXLEY ACT

We may not be able to implement Section 404 of the Sarbanes-Oxley Act on a timely basis. The SEC, as directed by Section 404 of the Sarbanes-Oxley Act, adopted rules generally requiring each public company to include a report of management on the company’s internal controls over financial reporting in its annual report on Form 10-K that contains an assessment by management of the effectiveness of the company’s internal controls over financial reporting.  This requirement first applied to our annual report on Form 10-K for the fiscal year ending June 30, 2008.  In addition, commencing with our annual report for the fiscal year ending June 30, 2009, our independent registered accounting firm must attest to and report on management’s assessment of the effectiveness of our internal controls over financial reporting.

We have not yet developed a Section 404 implementation plan.  We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement.  How companies should be implementing these new requirements including internal control reforms to comply with Section 404’s requirements and how independent auditors will apply these requirements and test companies’ internal controls, is still reasonably uncertain. 

We expect that we will need to hire and/or engage additional personnel and incur incremental costs in order to complete the work required by Section 404.  We can not assure you that we will be able to complete a Section 404 plan on a timely basis.  Additionally, upon completion of a Section 404 plan, we may not be able to conclude that our internal controls are effective, or in the event that we conclude that our internal controls are effective, our independent accountants may disagree with our assessment and may issue a report that is qualified.  Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could negatively affect our operating results or cause us to fail to meet our reporting obligations.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES.

The Company made the following sales of unregistered (restricted) securities during the quarter ended on March 31, 2009 (not previously reported in a Form 8-K):

The Company issued 1,200,000  shares of common stock valued at $48,000 for prepaid rent.

The Company issued 6,000,000  shares of common stock valued at $180,000 to a consultant  for services.

The Company issued 150,000  shares of common stock valued at $4,500 to an employee for services.

The Company sold 10,000,000 shares of common stock for cash in the amount of $200,000.

No commissions were paid in connection with any of these sales. We did not employ any form of general solicitation or advertising in connection with the offer and sale of the securities described below. Except as otherwise noted above, the offer and sale of the securities listed below were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act or Regulation D or Regulation S promulgated by the Securities and Exchange Commission as transactions by an issuer not involving any public offering.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

None.

SUBSEQUENT EVENTS.

Subsequent to March 31, 2009,  the Company issued the following shares of common stock:

A total of 10,000,000 shares of common stock were issued to a total of six consultants for services;

A total of 129,812,000 shares of common stock  were sold for cash;

A total of 400,000 shares of common stock were issued to employees for services;

A total of 70,000,000 shares of common stock were issueed to three members of management pursuant to a long-term incentive plan;

A total of 9,360,000 shares of common stock were issued for the exercise of stock options by a consultant.

ITEM 6. EXHIBITS.

Number	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of Paul Egan (filed herewith).
31.2	Rule 13a-14(a)/15d-14(a) Certification of Ciaran Egan (filed herewith).
32	Section 1350 Certification of Paul Egan and Ciaran Egan (furnished herewith).

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		RAHAXI, INC.
Date: May 20, 2009	By:	/s/ Paul Egan
		Paul Egan
		Chief Executive Officer

Date: May 20, 2009	By:	/s/ Ciaran Egan
		Ciaran Egan
		Secretary/Treasurer/ Chief Financial Officer

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